The rise and fall of entrepreneurship

No offense, but entrepreneurs are a little like locusts. Year in and year out there are always a few around. Then every once in a while they arrive in huge numbers and change the landscape completely before almost disappearing again. We're in one of those periods now.

Locusts, at least, come and go at regular intervals; entrepreneurship is less predictable. There was a long period of entrepreneurial activity in the latter half of the nineteenth century, and a detectable spurt following World War II. During the 1950s and early '60s, in contrast -- when William H. Whyte's The Organization Man was a best-seller -- entrepreneurs seemed scarce, just as they had in the '20s. One might wonder what will happen in the '90s.

Where do entrepreneurs go when they aren't busy creating new companies? What drives them off, and what brings them back? What role do entrepreneurs play, exactly, in the larger ebb and flow of economic activity? Would we even want them around in large numbers all the time? How, in other words, does the current entrepreneurial boom fit into the continuum of our nation's economic, political, and cultural life?

Until recently no one was even asking those questions. The assumption was that if entrepreneurship was good and entrepreneurs useful, more of both would be better, both today and in the future. However, three current books place the entrepreneur's role in a larger context.

Begin with American Genesis: A Century of Invention and Technological Enthusiasm 1870-1970 (Viking, 1989), by Thomas P. Hughes. Hughes, who is the Mellon Professor of the History and Sociology of Science at the University of Pennsylvania, gives us a sympathetic but rigorous examination of the methods, strengths, weaknesses, foibles, and cumulative accomplishments of the men who invented and developed the technology that now surrounds us. But he also gives us an illuminating study of entrepreneurship and its changing role in America's economy and culture.

Despite what science texts teach, Thomas Edison didn't so much invent the light bulb as refine and develop a product that he could sell. We probably wouldn't honor him and others like him as inventors if they weren't also entrepreneurs, people who founded companies to exploit the commercial potential of their laboratory creations. Automaker Henry Ford and electric-utility mogul Samuel Insull, two of the technology-systems builders Hughes examines at length, were also entrepreneurs -- and at the same time inventors of important manufacturing processes and organizational structures.

You can read American Genesis for its surprising insights into the methodology and motivation of entrepreneurs whose names are folklore, but whose day-to-day work is obscured by myth. Yes, inventors experience what Hughes calls "eureka moments," but those are the rewards for long periods of methodical investigation. The inventors didn't just work blind, hoping to stumble over something. Hughes describes, for instance, their use of metaphor as an investigative aid. Edison "worked out the quadruplex telegraph, perhaps the most elegant and complex of his inventions," using the metaphor of a water system with pumps, pipes, valves, and waterwheels. The military problem called a reverse salient has been another useful model. A reverse salient is created when one segment of a battle line fails to move forward as quickly as those on either side, which ultimately will doom the advance. Perspicacious inventors, Hughes says, look for the reverse salients in new technology systems and then concentrate their work on those problems.

You can also read the book as history. Hughes draws a colorful picture of the cycle of entrepreneurship, showing how and why it changes. "In the opening stage, inventor-entrepreneurs like Edison solved the major technical problems. In the following stage, Insull and other manager-entrepreneurs presided over the organizational innovations facilitating growth. During the next stage, financiers took over the leading role." That was the electric-light and power business, but the cycle, as Hughes shows with anecdote and analysis, is similar in other industries.

Then too, you can read the book as sociology. Hughes argues persuasively that technology is a primary shaper of a unique American culture and is in turn shaped by it. We embed certain cultural values in the huge technological systems that we build. Technically, for example, the electric-power systems created in the United States and Britain could have been the same. But the U.S. system was built around the populist notion of high volume, low margin, while the British was designed around the idea of selling less for more. The automobile, similarly, isn't just an industrial artifact; it's a technological system whose design (large and powerful), manufacture (mass), and use (practically universal) embody American attitudes toward personal freedom and mobility. The automobile system, in turn, exerts implacable influences on how we live, travel, work, and enjoy ourselves.

Entrepreneurs, Hughes shows, are the agents through which society shapes its technological systems and through which the influences of the systems are fed back to society. Fast food, one might argue, is an unplanned consequence of America's transportation system. Entrepreneurs such as Ray Kroc, of McDonald's Corp., were the feedback agents.

If Hughes whets your appetite for more such history, take a couple of weeks in what's left of the summer to make it part of a trilogy. The other parts: Paul Kennedy's The Rise and Fall of the Great Powers, recently published in paperback by Vintage Books, and William Pfaff's Barbarian Sentiments: How the American Century Ends (Hill & Wang, 1989).

Kennedy's long-range view begins to give us some ideas why entrepreneurs disappear and what brings them out again. Economies -- and nations -- rise and fall in patterns that seem inescapable despite all efforts to avoid them. When The Rise and Fall was first published two years ago, its suggestion that America's midcentury hegemony might not last was greeted as a bit of heresy. It looks less heretical every day.

Pfaff, too, scolds us a bit. "It has been characteristic of American culture," he writes, "to think history mostly bunk, and certainly to act as though it were. . . . " Still, he admits the peculiarly ironic wisdom in this attitude. To acknowledge that we are fatalistically bound by history "would threaten the optimism that has been indispensable to the development of the United States itself. The denial that there are wolves at the door has made us go forward. Other societies are obsessed by the wolves." Entrepreneurs, of course, are not. If they were, they couldn't be entrepreneurs.

To read history, though, is also to confront mortality -- political, cultural, economic, and finally your own. That can be discomfiting, especially to entrepreneurs. They seem to have a need always to be looking to tomorrow -- like the locusts, in blissful disregard of their inevitable demise.


"[Elmer Sperry] repeatedly turned down long-term associations and positions with large corporations of which he was not a major owner. He had an innate sense that these commitments would restrain his problem choice and the resultant exhilaration of the ninety-five-percent breakthroughs. . . . But Sperry, too, eventually established his own industrial enterprise, the Sperry Gyroscope Company, with its own small staff of inventor-engineers. He delayed this transition, however, until he was fifty years old and had approximately two hundred patents. And even after establishing the company, he left the routine problems to his staff, preserving freedom of problem choice for himself.

-- from American Genesis by Thomas P. Hughes